@CONFERENCE{Eisl2010,title = {Exploring the Performance of Government Debt Issuance}, author = {Alexander Eisl and Hermann Elendner and Stefan Pichler}, year = {2010}, address = {Århus}, url = {http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2010-Aarhus/2010meetings.shtml}, language = {EN}, misc = {European Financial Management Association 19th Meeting}, abstract = {The performance of governments in issuing debt is despite its importance for finance and welfare empirically an open question. Issuance timing in corporate finance and auction design have been studied extensively, yet skill of debt management offices (DMOs) in auctioning off national debt remain unexplored. We thus develop performance measures for the decisions the offices face: The amount to issue is largely exogenous to them, but they exercise discretion over its distribution across issue dates (timing) and the choice of instruments (allocation). DMOs can thereby optimise over prevailing market rates, their country's spread, or the mispricing between primary and secondary markets.
For a unique dataset we benchmark the issuance strategies of five European DMOs. While we find no ability to outperform secondary market rates, Germany appears to time primary market effects favourably: Although it cannot, on average, overprice issues, it allots more on dates of low underpricing, compared to other DMOs. Thus, while the government issues do not exhibit strong effects on the secondary market, DMOs are well advised to take primary market effects into account.},}

Abstract

The performance of governments in issuing debt is despite its importance for finance and welfare empirically an open question. Issuance timing in corporate finance and auction design have been studied extensively, yet skill of debt management offices (DMOs) in auctioning off national debt remain unexplored. We thus develop performance measures for the decisions the offices face: The amount to issue is largely exogenous to them, but they exercise discretion over its distribution across issue dates (timing) and the choice of instruments (allocation). DMOs can thereby optimise over prevailing market rates, their country's spread, or the mispricing between primary and secondary markets.
For a unique dataset we benchmark the issuance strategies of five European DMOs. While we find no ability to outperform secondary market rates, Germany appears to time primary market effects favourably: Although it cannot, on average, overprice issues, it allots more on dates of low underpricing, compared to other DMOs. Thus, while the government issues do not exhibit strong effects on the secondary market, DMOs are well advised to take primary market effects into account.